UK: Commercial Court Finds Ship Off-Hire Whilst Held By Pirates

Last Updated: 13 April 2012
Article by Jonathan Elvey and David Richards

Osmium Shipping Corporation v. Cargill International SA (Captain Stefanos) [2012] EWHC 571 (Comm)

The Commercial Court has considered a further case on whether a ship was off-hire whilst held by pirates.

The background facts

The owners and the charterers entered into a charterparty on the NYPE 1946 form in respect of the Captain Stefanos. It undertook a voyage from South Africa to the Continent/Mediterranean. Whilst en route to the discharge port, the vessel transited the Suez Canal and, on or about 21 September 2008, was hijacked by pirates off the coast of Somalia. The vessel was released on or about 6 December 2008 after the owners paid a substantial ransom. The charterers contended that the vessel was off-hire for the period of the hijacking, i.e. between 21 September 2008 and 6 December 2008.

Off-hire

The London arbitration tribunal held that the vessel was off-hire under a rider clause to the charterparty which provided as follows at Clause 56:

"Should the vessel put back whilst on voyage by reason of any accident or breakdown, or in the event of loss of time either in port or at sea or deviation upon the course of the voyage caused by ... capture/seizure, by detention or threatened detention by any authority including arrest, the hire shall be suspended ..."

In view of the 2011 decision in The Saldanha, an Ince case reviewed in the July 2010 E-Brief, neither party contended that the vessel could have been off-hire pursuant to the unamended version of Clause 15 in the NYPE form. The charterers successfully contended in the arbitration that the hijacking came within Clause 56 as a "capture/seizure" of the vessel. The owners argued during the appeal hearing that the vessel was not off-hire during the period of the hijacking for the following reasons:

  1. The off-hire event of a "capture/seizure" within Clause 56 was qualified by the words "by any authority". By contrast, the charterers claimed that the words "capture/seizure" stood alone and it was only the words "detention or threatened detention" which were qualified by the words "by any authority".
  2. The charterparty included the Conwartime Clause 2004 and therefore, reading the charter as a whole, the risk of piracy was placed upon the charterers and not upon the owners. Any off-hire clause had to be read with this business purpose and allocation of risk in mind.
  3. The ship was not off-hire because the owners were complying with the orders of pirates and this was deemed to be fulfilment of the charter service by virtue of Conwartime 2004.

The construction of Clause 56

The judge, Mr Justice Cooke, held that the starting point when construing Clause 56 of the charterparty was to look for the ordinary and natural or conventional meaning of the language used in the context of the agreement, the parties' relationship and the relevant facts surrounding the transaction so far as known to the parties.

Mr Justice Cooke concluded that the wording used and the structure of the clause – including its punctuation and grammar – all supported the charterers' submissions. Each separate off-hire event within Clause 56 was, by and large, separated by a comma. Therefore the words "capture/seizure" were separated from the words "detention or threatened detention by any authority". In reaching this decision, the judge made it clear that the phrase "capture/seizure" encompassed any act of forcible possession, including a hijacking by pirates.

The owners had contended that Clause 56 had to be re-read by taking account of the overall allocation of risk in the charterparty. They submitted that the effect of incorporating the Conwartime clause was to allocate to the charterers all risks of piracy. This "allocation of risk" outweighed any reliance on the punctuation used in Clause 56. Mr Justice Cooke was not persuaded by this argument saying that it was Clause 56, in itself, which dealt with allocation of risks between the parties where hire is concerned.

Conwartime 2004

The owners submitted that Conwartime 2004 specifically deals with "War Risks", which include "actual, threatened or reported" acts of piracy. Sub-clause (f) of Conwartime 2004 entitles owners to comply with the orders of "any other Government, body or group whatsoever acting with the power to compel compliance with their orders or directions". This phrasing, the owners argued, included orders of pirates and therefore, under sub-clause (h) of Conwartime 2004, compliance with orders of pirates was to be deemed "due fulfilment of the charterparty". The vessel could not be off-hire when the owners were deemed to have fulfilled the service required of the vessel.

Mr Justice Cooke did not accept this argument, holding that Conwartime 2004 does not deal explicitly with off-hire periods. Conwartime 2004 relates to performance of the charterparty and to breach of the charterparty, not to off-hire. While Conwartime 2004 deals expressly with piracy situations, it is not directed to off-hire situations. While the judge did not have to decide the point, he doubted that sub-clause (f) of Conwartime 2004 was apt to include orders from pirates.

Comment

In this case, the court read the off-hire clauses in the charterparty in isolation. The 2011 decision of the Supreme Court in Rainy Sky SA & others v. Kookmin Bank, an Ince case reviewed in the January 2012 E-Brief, held that construction of a contract is a "unitary exercise", i.e. it is necessary to read the contract as a whole. The court said that this approach was not appropriate when looking at an off-hire clause – off-hire provisions frequently stand alone from the rest of the charter. Mr Justice Cooke also did not accept arguments as to the "commercial construction", adopting instead a reasonably strict linguistic approach when construing the clause.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.